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January 22, 2007

 

State Audit of Lakeland Central School District
Finds Weak Fiscal Management Practices

District Has Agreed to Make Changes to Improve Financial Practices

Because the Lakeland Central school district was not maintaining accurate financial records, the school board was unable to monitor spending effectively and the district ended the 2004-05 school year with a $1.2 million operating deficit, according to an audit released today by the New York State Comptroller’s office. Two years earlier the district had a $5 million surplus that it used to reduce the tax levy.

Auditors found that the district allocated $3.4 million from surplus funds in 2002-03 and 2003-04 to finance operations. Essentially, the district planned an operating deficit and used surplus funds to fill that deficit and reduce the tax levy an acceptable practice in New York State because a district can only hold two percent of its budget in unreserved, unappropriated funds according to state law. But in 2004-05 the district incurred a $1.2 million unexpected operating deficit, which eliminated any remaining surplus the district had left. Auditors found that the district’s deteriorating financial condition was caused by the school board’s failure to properly budget and monitor spending, which occurred in large part because district officials did not provide the board with accurate financial information.

For instance, auditors found that the school board had not established controls to ensure that expenses were within the adopted budget. As a result, the district spent $2.8 million more for general support, instruction and transportation than had been budgeted for in 2004-05. The board’s ability to oversee spending was also severely limited because the former business official’s monthly reports to the board were virtually useless. The December 31, 2005 report in particular understated revenues by $45.1 million and expenditures by $32.8 million, and overstated cash on hand by $26.4 million.

District officials also did not keep accurate financial records for a $22.8 million capital project to improve the district’s elementary, middle and high schools and other district buildings, and ultimately the district overspent $563,488 for this project. Nor did the district file the proper documentation to request state aid for 18 projects over a six-year period. Auditors were unable to calculate the total amount of building aid that the district was due because the records were so poor. To remedy the situation, the district has hired a consultant to file the necessary paperwork with the state.

The district generally agreed with the audit findings and noted in its response to the audit that it has taken a number of steps to strengthen internal controls, train staff and improve its accounting systems. The audit is part of a statewide effort by the State Comptroller’s office to strengthen fiscal practices at schools after problems were found at several Long Island school districts. Currently, the State Comptroller’s office has approximately 170 school audits underway.

Click here for a copy of the audit.

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